<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                            ----------------------
                                  FORM 10-KSB
                                        
(Mark One)

[x]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For fiscal year ended DECEMBER 31, 1998
                      -----------------

[_]  Transition report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934

     For the transition period from ______________to _______________

     Commission file number      000-24139
                            --------------

                        DECATUR FIRST BANK GROUP, INC.
                        ------------------------------
                (Name of Small Business Issuer in Its Charter)

               GEORGIA                                 58-2254289
----------------------------------------   -----------------------------------
   (State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
   Incorporation or Organization)

1120 COMMERCE DRIVE, DECATUR, GEORGIA                    30030
----------------------------------------   -----------------------------------
(Address of Principal Executive Offices)               (Zip Code)

             404-373-1000
----------------------------------------
(Issuer's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:   NONE.

Securities registered pursuant to Section 12(g) of the Act:  COMMON STOCK, NO
PAR VALUE.

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days.  Yes  X      No ____
                                                           ---        

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or a information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [_]

State issuer's revenues for its most recent fiscal year:  $1,826,554
                                                          ----------

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days:  $7,388,401 AS OF FEBRUARY 25, 1999.
                                         ---------------------------------- 

                   APPLICABLE ONLY TO CORPORATE REGISTRANTS

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 941,924 AS OF MARCH 25, 1999.
                                                  ----------------------------

     Transitional Small Business Disclosure format (check one):  Yes ____
No X
  ---
       
                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Annual Report to Shareholders for the fiscal year ended
December 31, 1998 are incorporated by reference into Part I and II.  Portions of
the Proxy Statement for the Annual Meeting of Shareholders, scheduled to be held
April 27, 1999, are incorporated by reference into Part III.

<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
<S>                                                                                                  <C> 
PART I    .........................................................................................   1

ITEM 1.   DESCRIPTION OF BUSINESS..................................................................   1

ITEM 2.   DESCRIPTION OF PROPERTIES................................................................   7

ITEM 3.   LEGAL PROCEEDINGS........................................................................   8

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................   8

PART II   .........................................................................................   8

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND                                                   

          RELATED STOCKHOLDER MATTERS..............................................................   8

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....   8

ITEM 7.   FINANCIAL STATEMENTS.....................................................................   9

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.....   9

PART III  .........................................................................................   9

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL                                        

          PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT...............................   9

ITEM 10.  EXECUTIVE COMPENSATION...................................................................   9

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND                                         

          MANAGEMENT...............................................................................   10

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........................................   10

ITEM 13.  EXHIBITS, LISTS AND REPORTS ON FORM 8-K..................................................   10
</TABLE> 

                                      -i-
<PAGE>
 
                                    PART I


ITEM 1.   DESCRIPTION OF BUSINESS

                                  THE COMPANY

     The Company was incorporated as a Georgia business corporation on August 2,
1996, and became a bank holding company by acquiring all of the Common Stock of
Decatur First Bank (the "Bank"). The Bank is the only subsidiary of the Company.

     The Company was organized to facilitate the Bank's ability to serve its
customers' requirements for financial services. The holding company structure
provides flexibility for expansion of the Company's banking business through the
possible acquisition of other financial institutions and the provision of
additional banking-related services that a traditional commercial bank may not
provide under present laws. For example, banking regulations require the Bank to
maintain a minimum ratio of capital to assets. In the event that the Bank's
growth prevents it from maintaining this minimum ratio, the Company may borrow
funds, subject to capital adequacy guidelines of the Federal Reserve and
contribute them to the capital of the Bank and otherwise raise capital in a
manner unavailable to the Bank under the existing banking regulations.

     The Company has no present plans to acquire any additional operating
subsidiaries. The Company may, however, make additional acquisitions in the
future in the event that the acquisitions are deemed to be in the best interests
of the Company and its shareholders. Such acquisitions, if any, will be subject
to certain regulatory approvals and requirements. See "Supervision and
Regulation--General."

                                   THE BANK

GENERAL

     The Bank began business in the third quarter of 1997 as a full-service
commercial bank. The Bank offers personal and business checking accounts,
interest-bearing checking accounts, savings accounts and various types of
certificates of deposit. The Bank also offers installment loans, real estate
loans, construction loans, second mortgage loans, commercial and Small Business
Administration loans and home equity lines of credit. In addition, the Bank
provides such services as official bank checks and money orders, Mastercard
credit cards, safe deposit box, traveler's checks, bank-by-mail, direct deposit
of payroll and Social Security checks and U.S. Savings Bonds.

PHILOSOPHY

     The philosophy of the Bank's management is to emphasize prompt and
responsive personal service to residents of Decatur, Georgia, as well as other
communities located in DeKalb County, in order to attract customers and acquire
market share controlled by other financial institutions in the Bank's market
area. Management believes that the Bank offers residents of Decatur and
surrounding counties the benefits associated with a locally owned and managed
community bank. Management has implemented an active call program, by which
officers and directors promote these efforts by personally describing the
products, services and philosophy of the Bank to both existing customers and new
business prospects. The Bank's directors are active members in the Decatur
community and their continued active community involvement provides them with an
opportunity to promote the Bank and its products and services.

                                       1
<PAGE>
 
MARKET AREA AND COMPETITION

     The Bank is located in Decatur, Georgia. The Bank's primary market area is
defined as the five mile radius of the Center of Decatur, Georgia. Decatur is
the county seat of DeKalb County and is located 12 minutes east of downtown
Atlanta, Georgia. Decatur is four square miles in size and there are over 12
distinct neighborhoods within the City of Decatur. The Bank competes for
deposits and loan customers with other financial institutions whose resources
are equal to or greater than those available to the Bank and the Company.
Decatur is served by eleven commercial banks, two savings institutions and four
credit unions, which, collectively, operate 38 banking offices. These financial
institutions offer all of the services that the Bank offers.

LOAN PORTFOLIO

     LENDING POLICY.  The Bank was established to support Decatur and
surrounding areas of DeKalb County. The Bank aggressively seeks creditworthy
loans within a limited geographic area. The Bank's primary commercial lending
function is to make consumer loans to individuals and commercial loans to small
and medium-sized businesses and professional concerns. In addition, the bank
makes real-estate-related loans, including construction loans for residential
and commercial properties, and primary and secondary mortgage loans for the
acquisition or improvement of personal residences. The Bank avoids
concentrations of loans to a single industry or based on a single type of
collateral.

     The Bank's legal lending limits are 15% of its statutory capital base for
unsecured loans and 25% of its statutory capital base for secured loans. The
Bank's statutory capital base is determined by the sum of its common stock,
paid-in capital, appropriated retained earnings, and capital debt, or the amount
of net assets of the Bank, whichever is the lower amount. As of December 31,
1998, the Bank's legal lending limits were approximately $1,253,445 for
unsecured loans and approximately $2,089,074 for secured loans. While the Bank
generally employs more conservative lending limits, the Board of Directors has
discretion to lend up to the legal lending limits as described above.

     CONSUMER LOANS.  The Bank makes consumer loans, consisting primarily of
installment loans to individuals for personal, family and household purposes,
including loans for automobiles, home improvements and investments. Risks
associated with consumer loans include, but are not limited to, fraud,
deteriorated or non-existing collateral, general economic downturn and customer
financial problems.

     COMMERCIAL LOANS.  The Bank's commercial lending is directed principally
toward small to mid-size businesses whose demand for funds falls within the
legal lending limits of the Bank. This category of loans includes loans made to
individual, partnership or corporate borrowers, and obtained for a variety of
business purposes. Risks associated with these loans can be significant and
include, but are not limited to, fraud, bankruptcy, economic downturn,
deteriorated or non-existing collateral and changes in interest rates.

     REAL ESTATE LOANS.  The Bank makes and holds real estate loans, consisting
primarily of single-family residential construction loans for one-to-four unit
family structures. The Bank requires a first lien position on the land
associated with the construction project and offers these loans to professional
building contractors and homeowners. Loan disbursements require on-site
inspections to assure the project is on budget and that the loan proceeds are
being used for the construction project and not being diverted to another
project. The loan-to-value ratio for such loans are predominantly 80% of the
lower of the as-built appraised value or project cost, and a maximum of 90% if
the loan is amortized. Loans for construction can present a high degree of risk
to the lender, depending upon, among other things, whether the builder can sell
the home to a buyer, whether the buyer can obtain permanent financing, whether
the transaction produces income in the interim and the nature of changing
economic conditions.

                                       2
<PAGE>
 
     INVESTMENTS.  In addition to loans, the Bank makes other investments
primarily in obligations of the United States or obligations guaranteed as to
principal and interest by the United States and other taxable securities. No
investment in any of those instruments will exceed any applicable limitation
imposed by law or regulation.

     DEPOSITS.  The Bank offers a wide range of commercial and consumer deposit
accounts, including checking accounts, money market accounts, a variety of
certificates of deposit, and IRA accounts. The Bank employs an aggressive
marketing plan in the overall service area, a broad product line, and
competitive services as its primary means to attract deposits. The primary
sources of deposits are residents of, and businesses and their employees located
in, the Bank's market area. Deposits are obtained through personal solicitation
by the Bank's officers and directors, direct mail solicitations and
advertisements published in the local media. Deposits are generated by offering
a broad array of competitively priced deposit services, including demand
deposits, regular savings accounts, money market deposits (transaction and
investment), certificates of deposit, retirement accounts, and other deposit or
funds transfer services which may be permitted by law or regulation and which
may be offered to remain competitive in the market.

     ASSET AND LIABILITY MANAGEMENT.  The Bank manages its assets and
liabilities to provide an optimum and stable net interest margin, a profitable
after-tax return on assets and return on equity, and adequate liquidity. These
management functions are conducted within the framework of written loan and
investment policies adopted by the Bank. The Bank attempts to maintain a
balanced position between rate sensitive assets and rate sensitive liabilities.
Specifically, it charts assets and liabilities on a matrix by maturity,
effective duration, and interest adjustment period, and endeavors to manage any
gaps in maturity ranges.

                                   EMPLOYEES

     At December 31, 1998, the Company employed 14 full-time employees. The
Company considers its relationship with its employees to be excellent.

                          SUPERVISION AND REGULATION

     The following discussion describes the material elements of the regulatory
framework that applies to banks and bank holding companies and provides certain
specific information related to the Company.

GENERAL

     The Company is a bank holding company registered with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956, as currently in effect. As a result, the Company and any future non-bank
subsidiaries the Company establishes is and will be subject to the supervision,
examination, and reporting requirements of the Bank Holding Company Act and the
regulations of the Federal Reserve.

     The Bank Holding Company Act requires every bank holding company to obtain
the Federal Reserve's prior approval before: (1) it may acquire direct or
indirect ownership or control of any voting shares of any bank if, after the
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the bank's voting shares; (2) it or any of its non-bank
subsidiaries may acquire all or substantially all of the assets of any bank; or
(3) it may merge or consolidate with any other bank holding company.

                                       3
<PAGE>
 
     The Bank Holding Company Act also provides that the Federal Reserve may not
approve any transaction that would result in or tend to create a monopoly,
substantially lessen competition or otherwise function as a restraint of trade,
unless the anticompetitive effects of the proposed transaction are clearly
outweighed by the public interest in meeting the convenience and needs of the
community to be served. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. The Federal Reserve's consideration of financial resources generally
focuses on capital adequacy, which is discussed below.

     The Company and any other bank holding company located in Georgia may
acquire a bank located in any other state, and any bank holding company located
outside of Georgia may acquire any Georgia-based bank, regardless of state law
to the contrary. In either case, certain deposit-percentage, aging requirements,
and other restrictions apply. National and state-chartered banks may branch
across state lines by acquiring banks in other states. By adopting legislation
prior to June 1, 1997, a state could elect either to "opt in" and accelerate the
date after which interstate branching would be permissible or "opt out" and
prohibit interstate branching altogether. The Georgia Interstate Banking Act
provides that interstate acquisitions by or of institutions located in Georgia
are permitted in states that also allow national interstate acquisitions. The
Georgia Interstate Branching Act permits Georgia-based banks and bank holding
companies owning or acquiring banks outside of Georgia and all non-Georgia banks
and bank holding companies owning or acquiring banks in Georgia to merge any
lawfully acquired bank into an interstate branch network. The Georgia Interstate
Branching Act also allows banks to establish new branches throughout Georgia.

     The Bank Holding Company Act generally prohibits the Company from engaging
in activities other than banking or managing or controlling banks or other
permissible subsidiaries. The Bank Holding Company Act also prohibits the
Company from acquiring or keeping direct or indirect control of any company
engaged in any activities other than those activities that the Federal Reserve
determines to be closely related to banking or managing or controlling banks. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the activity reasonably can be expected to produce
benefits to the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices. For example, the Federal Reserve has
determined that factoring accounts receivable, acquiring or servicing loans,
leasing personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance in connection
with credit transactions, and performing certain insurance underwriting
activities are permissible activities of bank holding companies. The Bank
Holding Company Act does not place territorial limitations on permissible
non-banking activities of bank holding companies. Despite prior approval, the
Federal Reserve may order a holding company or its subsidiaries to terminate any
activity or ownership or control of any subsidiary when it has reasonable cause
to believe that the holding company's continued activity, ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiaries.

     The Bank's deposits are insured by the FDIC to the maximum extent provided
by law. The Bank is also be subject to numerous state and federal statutes and
regulations that affect its business, activities and operations, and it is
supervised and examined by one or more state or federal bank regulatory
agencies.

     The FDIC and the Georgia Department of Banking and Finance regularly
examine the operations of the Bank and have the authority to approve or
disapprove mergers, the establishment of branches, and similar corporate
actions. Both regulatory agencies also have the power to prevent the continuance
or development of unsafe or unsound banking practices or other violations of
law.

                                       4
<PAGE>
 
PAYMENT OF DIVIDENDS

     The Company is a legal entity separate and distinct from the Bank. The
principal source of the Company's cash flow, including cash flow to pay
dividends to its shareholders, is dividends that the Bank pays to the Company.
Statutory and regulatory limitations apply to the Bank's payment of dividends to
the Company as well as to the Company's payment of dividends to its
shareholders.

     If, in the opinion of the federal banking regulator, the Bank were engaged
in or about to engage in an unsafe or unsound practice, the federal banking
regulator could require, after notice and a hearing, that the Bank cease and
desist from its practice. The federal banking agencies have indicated that
paying dividends that deplete a depository institution's capital base to an
inadequate level would be an unsafe and unsound banking practice. Under the
Federal Deposit Insurance Corporation Improvement Act of 1991, a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. Moreover, the federal
agencies have issued policy statements that provide that bank holding companies
and insured banks should generally only pay dividends out of current operating
earnings. See "--Prompt Corrective Action" below.

     Under the dividend restrictions imposed by federal and state law and the
conditions included in the Georgia Department of Banking and Finance's approval
of the Bank's Charter application, at December 31, 1998, the Bank could not
declare dividends to the Company.

     The payment of dividends by the Company and the Bank may also be affected
or limited by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines.

CAPITAL ADEQUACY

     The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve in the case of the Company and the
appropriate federal banking regulator in the case of the Bank. The Federal
Reserve has established two basic measures of capital adequacy for bank holding
companies -- a risk-based measure and a leverage measure. A bank holding company
must satisfy all applicable capital standards to be considered in compliance.

     The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.

     The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. At least one-half of total capital must comprise common stock,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets.
This portion of total capital is referred to as Tier 1 Capital. The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves and is referred to as Tier 2 Capital. At December 31, 1998,
the Company's consolidated ratio of total capital to risk-weighted assets was
47.6% and its consolidated ratio of Tier 1 Capital to risk-weighted assets was
46.5%.

     In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets, of 3% for bank holding companies that meet the specified
criteria including having the highest regulatory rating. All other bank holding
companies generally are required to maintain a leverage ratio of at least 3%,
plus an additional cushion of 100 to 200 basis points. The Company's leverage
ratio at December 31, 1998 was 24.2%. The guidelines also provide that bank

                                       5
<PAGE>
 
holding companies experiencing internal growth, or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a bank
holding company's Tier 1 Capital leverage ratio, after deducting all
intangibles, and other indicators of capital strength in evaluating proposals
for expansion or new activities.

     The Bank is subject to risk-based and leverage capital requirements adopted
by the FDIC, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies. In addition, as a condition to granting the
Bank's charter, the Georgia Department of Banking and Finance requires the Bank
to maintain a Tier 1 Capital to assets ratio of at least 8% for the first three
years of the Bank's operation.

     Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed on FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"--Prompt Corrective Action."

SUPPORT OF SUBSIDIARY INSTITUTIONS

     Under Federal Reserve policy, the Company is expected to act as a source of
financial strength for, and to commit resources to support, the Bank. This
support may be required at times when, without this Federal Reserve policy, the
Company might not be inclined to provide it. In addition, any capital loans by a
bank holding company to its subsidiary bank will be repaid only after its
deposits and certain other indebtedness are repaid in full. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company to
a federal bank regulatory agency to maintain the capital of a banking subsidiary
will be assumed by the bankruptcy trustee and entitled to a priority of payment.

PROMPT CORRECTIVE ACTION

     The Federal Deposit Insurance Corporation Improvement Act of 1991
established a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, the federal banking regulators
have established five capital categories (well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized), and are required to take certain mandatory supervisory
actions, and are authorized to take other discretionary actions, relating to
institutions in the three undercapitalized categories. The severity of the
action depends upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the banking regulator must appoint a
receiver or conservator for an institution that is critically undercapitalized.
The federal banking agencies have specified by regulation the relevant capital
level for each category.

     An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to certain limitations. The
controlling holding company's obligation to fund a capital restoration plan is
limited to the lesser of 5% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches, or engaging in any new
line of business, except under an accepted capital restoration plan or with FDIC
approval. In addition, the appropriate federal banking agency may treat an
undercapitalized institution in the same manner as it treats a significantly
undercapitalized institution, if it determines that those actions are necessary.

                                       6
<PAGE>
 
     At December 31, 1998, the Bank's capital level placed it in the well
capitalized category.

FDIC INSURANCE ASSESSMENTS

     The FDIC has adopted a risk-based assessment system for insured depository
institutions that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. The system assigns an
institution to one of three capital categories: (1) well capitalized; (2)
adequately capitalized; and (3) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. The FDIC also assigns an
institution to one of three supervisory subgroups within each capital group. The
supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation that the institution's primary federal regulator provides
to the FDIC and information that the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds. The FDIC determines an institution's insurance assessment rate based on
the institution's capital category and supervisory category. Under the
risk-based assessment system, there are nine combinations of capital groups and
supervisory subgroups to which different assessment rates are applied.
Assessments range from 0 to 27 cents per $100 of deposits, depending on the
institution's capital group and supervisory subgroup.

     Effective January 1, 1997, the FDIC imposed assessments to help repay the
$780 million in annual interest payments on the $8 billion of Financing
Corporation bonds issued in the late 1980s as part of the government rescue of
the thrift industry. The FDIC will assess banks at a rate of 1.3 cents per $100
of deposits until December 31, 1999. Thereafter, it will add approximately 2.4
cents per $100 of deposits to each assessment.

     The FDIC may terminate an institution's deposit insurance if it finds that
the institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.

PROPOSED LEGISLATION AND REGULATORY ACTION

     New regulations and statutes are regularly proposed that contain 
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. We cannot predict whether
or in what form any proposed regulation or statute will be adopted or the extent
to which our business may be affected by any new regulation or statute.

                       SELECTED STATISTICAL INFORMATION

     The responses to this section of Item I are included in the Company's
Annual Report to Shareholders under the heading "Selected Statistical
Information" at pages 26 through 32, and are incorporated herein by reference.

ITEM 2.   DESCRIPTION OF PROPERTIES

     The Company and the Bank are located at 1120 Commerce Drive, Decatur
Georgia. The Company has leased this landmark site in the financial district of
downtown Decatur.

     The Company entered into an Agreement to Lease, dated August 20, 1996, with
Daniel B. Pattillo, pursuant to which the Company leases the building from Mr.
Pattillo. The term of the lease expires June 

                                       7
<PAGE>
 
1, 2002. The Agreement to Lease provides that the Company has an option to
purchase the building under certain conditions.

     The building currently contains 5,600 square feet of usable space. Prior
to opening the Bank, the Company renovated the building. The top floor contains
4,113 square feet and was converted into the banking lobby and operations
department. The lower level, which contains 1,487 square feet, is used for
executive offices. Most of the operations and back-room work is outsourced so
less space is needed. Video drive-ups are used instead of physical drive-ups.
The lower parking lot has sufficient room for two drive-up lanes in addition to
employee parking. The property fronts Commerce Drive, which is a main
thoroughfare in Decatur, and backs up to a retail area and residential property.
Access to the drive-ups is available through a side street off of Commerce
Drive. The main parking lot is accessible from Commerce Drive.

     Other than normal real estate lending activities of the Bank, the Company
does not invest in real estate, interests in real estate, real estate mortgages,
or securities of or interests in persons primarily engaged in real estate
activities.

ITEM 3.   LEGAL PROCEEDINGS

     There are no material pending legal proceedings to which the Company is a
party or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of the Company or any associate of any of the foregoing, is a
party or has an interest adverse to the Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                    PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The response to this Item is partially included in the Company's Annual
Report to Shareholders at page (i) and is incorporated herein by reference.

     The Company has not sold any unregistered shares of its Common Stock, no
par value, during fiscal years 1998, 1997, or 1996.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     The response to this Item is included in the Company's Annual Report to
Shareholders under the heading, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," at pages 2 through 7, and is
incorporated herein by reference.

                                       8
<PAGE>
 
ITEM 7.   FINANCIAL STATEMENTS

     The following financial statements are included in the Company's Annual
Report to Shareholders at pages 8 through 25, and are incorporated herein by
reference.

     Independent Auditors' Report

     Financial Statements

     Consolidated Balance Sheets dated as of December 31, 1998 and 1997

     Consolidated Statements of Income for the years ended December 31, 1998 and
     1997

     Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 1998, and 1997

     Consolidated Statements of Cash Flows for the years ended December 31, 1998
     and 1997

     Notes to Consolidated Financial Statements

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

          Not Applicable.

                                   PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     The responses to this Item are included in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held April 27, 1999, under the
following headings, and are incorporated herein by reference.

     "Directors and Executive Officers - Election of Directors - Director
     Nominees and Continuing Directors," at pages 2 through 3,

     "Security Ownership of Certain Beneficial Owners and Management," at pages
     5 through 7, and

     "Section 16(a) Beneficial Ownership Reporting Compliance," at page 7.

ITEM 10.  EXECUTIVE COMPENSATION

     The responses to this Item are included in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held April 27, 1999, under the
heading, "Compensation of Executive Officers and Directors," at pages 4 through
5, and are incorporated herein by reference.

                                       9
<PAGE>
 
ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The responses to this Item are included in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held April 27, 1999, under the
headings, "Security Ownership of Certain Beneficial Owners," at pages 5 through
7, and are incorporated herein by reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The responses to this Item are included in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held April 29, 1999, under the
headings, "Certain Relationships and Related Transactions," at page 7, and
"Compensation of Executive Officers and Directors," at pages 4 through 5, and
are incorporated herein by reference.

ITEM 13.  EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit
     Number                 Exhibit
     ------                 -------
      3.1           Articles of Incorporation./1/

      3.2           Bylaws/1/

      4.1           Instruments Defining the Rights of Security Holders. See
                    Articles of Incorporation at Exhibit 3.1 hereto and Bylaws
                    at Exhibit 3.2 hereto.

      10.1          Agreement to Lease, dated August 20, 1996 between Daniel B.
                    Pattillo and Decatur First Bank Group, Inc./1/

      10.3          Employment Agreement, dated as of June 1, 1996 among Decatur
                    First Bank (In Organization), Decatur First Bank Group, Inc
                    and Judy B. Turner./2/

      10.4*         1998 Stock Incentive Plan/3/

      10.5          Agreement to Modify and Enlarge the Main Office Facility,
                    dated January 22, 1999 between Decatur First Bank and Malone
                    Construction Company (Exhibits omitted).

      13.1          Decatur First Bank Group, Inc. 1998 Annual Report to
                    Shareholders. Except with respect to those portions
                    specifically incorporated by reference into this Report, the
                    Company's 1998 Annual Report to Shareholders is not deemed
                    to be filed as part of this Report.

      22.1          Subsidiaries of Decatur First Bank Group, Inc./3/

      24.1          Power of Attorney (appears on the signature pages to this
                    Annual Report on 10-KSB).

      27.1          Financial Data Schedule

(b)  Reports on Form 8-K filed in the fourth quarter of 1998: None.

______________________

                                       10
<PAGE>
 
*    Compensatory plan or arrangement.
/1/  Incorporated herein by reference to exhibit of same number to the Company's
     Registration Statement on Form SB-2, Registration No. 333-14355, filed
     October 18, 1996.
/2/  Incorporated herein by reference to exhibit 10.4 to the Company's
     Registration Statement on Form SB-2, Registration No. 333-14355, filed
     October 18, 1996.
/3/  Incorporated herein by reference to exhibit of same number in the Company's
     Annual Report on Form 10-KSB for the years ended December 31, 1997.

                                       11
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                       DECATUR FIRST BANK GROUP, INC.




                                       By: /s/ Judy B. Turner        
                                           -------------------------------------
                                           Judy B. Turner
                                           President and Chief
                                           Executive Officer


                                       Date: March 15, 1999


                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on
the signature page to this Report constitutes and appoints Judy B. Turner and
Merriell Autrey, Jr., his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him or her and in his or
her name, place, and stead, in any and all capacities, to sign any and all
amendments to this Report, and to file the same, with all exhibits hereto, and
other documents in connection herewith with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

           Signature                           Title             Date
           ---------                           -----             ----
/s/ John L. Adams, Jr.                    Director           March 16, 1999
------------------------------------
John L. Adams, Jr.

/s/ Merriell Autrey, Jr.                  Director           March 16, 1999
------------------------------------
Merriell Autrey, Jr.

/s/ Mary Bobbie Bailey                    Director           March 16, 1999
------------------------------------
Mary Bobbie Bailey

                                       12
<PAGE>
 
           Signature                       Title                   Date
           ---------                       -----                   ----

/s/ James A. Baskett                      Director             March 16, 1999
-------------------------------
James A. Baskett

/s/ John Walter Drake                     Director             March 16, 1999
-------------------------------
John Walter Drake

/s/ William F. Floyd                      Director             March 16, 1999
-------------------------------
William F. Floyd

/s/ Robert E. Lanier                      Director             March 16, 1999
-------------------------------
Robert E. Lanier

                                          Director
_______________________________
Carol G. Nickola

/s/ Lynn Pasqualetti                      Director             March 16, 1999
-------------------------------
Lynn Pasqualetti

/s/Roger K. Quillen                       Director             March 16, 1999
-------------------------------
Roger K. Quillen

/s/ James T. Smith, III                   Director             March 16, 1999
-------------------------------
James T. Smith, III

/s/ Kirby A. Thompson                     Director             March 16, 1999
-------------------------------
Kirby A. Thompson

/s/ Judy B. Turner                 Director, President and     March 16, 1999
-------------------------------
Judy B. Turner                     Chief Executive Officer

                                       13
<PAGE>
 
                                 EXHIBIT INDEX

Exhibit
Number           Exhibit
------           -------
3.1       Articles of Incorporation./1/

3.2       Bylaws./1/

4.1       Instruments Defining the Rights of Security Holders. See Articles of
          Incorporation at Exhibit 3.1 hereto and Bylaws at Exhibit 3.2 hereto.

10.1      Agreement to Lease, dated August 20, 1996 between Daniel B. Pattillo
          and Decatur First Bank Group, Inc./1/

10.3*     Employment Agreement, dated as of June 1, 1996 among Decatur First
          Bank (In Organization), Decatur First Bank Group, Inc and Judy B.
          Turner./2/

10.4*     1998 Stock Incentive Plan/3/

10.5      Agreement to Modify and Enlarge the Main Office Facility, dated
          January 22, 1999 between Decatur First Bank and Malone Construction
          Company (Exhibits omitted).

13.1      Decatur First Bank Group, Inc. 1998 Annual Report to Shareholders.
          Except with respect to those portions specifically incorporated by
          reference into this Report, the Company's 1998 Annual Report to
          Shareholders is not deemed to be filed as part of this Report.

22.1      Subsidiaries of Decatur First Bank Group, Inc./3/

24.1      Power of Attorney (appears on the signature pages to this Annual
          Report on 10-KSB).

27.1      Financial Data Schedule



______________________
*    Compensatory plan or arrangement.

/1/  Incorporated herein by reference to exhibit of the same number to the
     Company's Registration Statement on Form SB-2, Registration No. 333-14355,
     filed October 18, 1996.

/2/  Incorporated herein by reference to exhibit 10.4 to the Company's
     Registration Statement on Form SB-2, Registration No. 333-14355, filed
     October 18, 1996.

/3/  Incorporated herein by reference to exhibit of the same number in the
     Company's Annual Report on 10-KSB for the year ended December 31, 1997.